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The Institute of Chartered Accountants of India (ICAI) has released the updated December 2025 edition of its Handbook on Interest, Late Fee and Penalties under GST, underscoring how interest and penalty provisions can significantly magnify tax disputes once the department alleges non-compliance. The revised handbook comes at a time when GST authorities across states are increasingly relying on audits, data analytics and retrospective scrutiny, often resulting in demands not just for tax, but al
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FAQ :
The updated ICAI handbook highlights how interest and penalty provisions under GST can significantly escalate tax disputes for taxpayers, especially when combined with tax demands.
No, interest under Section 50 of the CGST Act is automatic and compensatory once tax is held to be payable and the due date is crossed, even if the taxpayer disputes the demand.
Interest is generally levied at 18% per annum for delayed payment of tax and for wrongly availed and utilised input tax credit.
Following amendments, interest is now payable only on the portion of tax paid through the electronic cash ledger for delayed returns. However, this relief may not apply in cases of tax detected later through audits or voluntary payments.
GST penalties are linked to the nature of the default. Genuine errors may attract lower penalties under Section 73, while cases involving alleged suppression or wilful intent can trigger harsher penalties under Section 74 or 74A. Penalties are not automatic and require due process.
Retrospective demands covering multiple years can create a heavy compliance burden, leading to compounded exposure of tax, interest for each year of delay, and potential penalties.
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